CMA JUNE-2021 EXAMINATION

MANAGEMENT LEVEL
SUBJECT: R2. TAXATION

Model Solution

Solution of the Question No. 2:

(a)

(i) Break-up of Monthly Submitted Bill to TechBD Company Ltd.:

Bill Amount (excluding agency commission) 500,000
Agency Commission @ 10% 50,000
Gross Bill Amount 550,000

TDS to be deducted by TechBD company Ltd. (Higher of A & B)

(A) TDS on Agency Commission (@ 10%) 5,000

(B) Gross Bill Amount × 2.5% × 10% 1,375
So TDS Amount to be deducted by TechBD Company Ltd. is Tk. 5,000/=

(ii) TDS amount to be deducted by Z Ltd.:

TDS as per Sec. 52 of the supplied amount 10,000

(Here it is 5%)

Less: AIT paid by Jahin Trading at import stage U/S-53 10,000

TDS amount -

So no TDS amount to be deducted by Z Ltd.

(c)

Concord Group's
Computation of Total Income
Assessment Year 2016-17
Amount
Particulars
(Tk.)
Income from Food & Beverage Business 700,000
Income from Plastic Business 400,000
Loss from Motor Business (1,400,000)
Loss of motor business carried forward to next year (300,000)
Explanation:
Loss of motor business can be set off with income from any other business and can be carried forward in
next five successive years.

Page 1 of 8
 Concord Group's
Computation of Total Income
Assessment Year 2017-18
Amount
Particulars
(Tk.)
Income from Food & Beverage Business 900,000
Income from Plastic Business 700,000
Unabsorbed depreciation (500,000)
Total income other than motor business 1,100,000
Income from Motor Business 200,000
Loss from Motor Business brought forward from previous year (300,000)
Loss from Motor Business carried forward to next year (100,000)
Total Income 1,000,000
Explanation:
(i) Unabsorbed depreciation is to be set off with income from Food & beverage and plastic business as
loss from motor business still exist.
(ii) Loss from motor business carried forward from previous year can be set off only with the income
from same head.

Concord Group's
Computation of Total Income
Assessment Year 2018-19
Amount
Particulars
(Tk.)
Income from Food & Beverage Business 900,000
Loss from Plastic Business (1,200,000)
Loss from Plastic business carried forward to next year (300,000)
Income from Motor Business 50,000
Loss from Motor Business brought forward from previous year (100,000)
Loss of motor business carried forward to next year (50,000)
Total Loss (350,000)
Explanation:
(i) Loss of Plastic business can only be set off with income from food & beverage business.

Concord Group's
Computation of Total Income
Assessment Year 2019-20
Amount
Particulars
(Tk.)
Income from Food & Beverage Business 700,000
Unabsorbed depreciation (200,000)
Income from Food & Beverage Business 500,000
Income from Plastic Business 200,000

Page 2 of 8
 Loss from Plastic business brought forward from previous year (300,000)
Loss from Plastic business carried forward to next year (100,000)
Income from Motor Business 100,000
Loss from Motor Business brought forward from previous year (50,000)
Income from motor business carried forward to next year 50,000
Total Income 450,000
Explanation:
(i) Unabsorbed depreciation has been adjusted with income from food & beverage business as other
income heads' had adjustable loss brought from previous year.

(d)
Particulars Amount (Tk) Amount (Tk)
Tax-exempt government securities 10,000
Less: Exempted - full 10,000 0
Interest on 10% taxable government securities 20,000
(19,000÷0.95)
Less: Bank charge (5% on Tk. 19,000) 950 19,050
Interest on 15% debenture (200,000 × 15% × 6/12) 15,000
Less: Bank charge (5% of Tk. 14,250) 712.5
Interest on loan (150,000 × 10% × 6/12) 7,500 6787.5
Interest on pensioner sanchaypatra 18,000
Less: Exempted - full 18,000 -
Income from zero-coupon bond 1,000
Less: exempted - full 1,000 -
Taxable Income 25,837.50

Solution of the Question No. 3:

Mr. Karim
Computation of Total Income
Assessment Year: 2020-21
Income Year: 2019-20

Amount Amount Amount

Particulars Note
(Tk.) (Tk.) (Tk.)
Þ Income from Salary:
Basic Salary (Tk. 70,000 * 10 months) 2 700,000
House rent allowance:
Actual (50% of basic salary) 350,000
Less: Exempted:
50% of basic salary 350,000
or, Tk. 25,000 * 12 months 300,000
(lower one) 300,000 50,000
Bonus ( one month basic *1) 70,000
Medical allowance:

Page 3 of 8
 Actual amount (Tk. 5,000 *10 months) 50,000
Less: Exempted:
10% of basic salary 70,000
or, Tk. 1,200,000 1,200,000
(lower one) 70,000 -
Car Facility: 3
5% of basic salary 35,000
or Tk. 60,000 60,000
(Higher one includes as income) 60,000
Contribution to GPF (10% of basic salary) 4 70,000
(A) INCOME FROM SALARY
950,000

Þ Income from Securities:

Interest on Govt. Treasury Bond 20,000
Less: Fully exempted (as per 6th Sch.; Part-A, Para 24) 20,000 -
Interest on Less tax Govt. securities (Grossed up) 26,316
Less: deduction:
Bank Charge @ 2% (only applicable for less 5 526.32
tax Govt. securities)
(B) INCOME FROM SECURITIES 25,789

Þ Income from House Property:

(I) Income from Commercial building:
Annual Value of let out part ( Tk. 60,000*12) 720,000
Less: Allowable deductions:
Statutory deduction (30% of annual value) 216,000
Holding Tax 24,000
Fire Insurance Premium 15,000
255,000
465,000
(II) Unspent statutory deduction amount over actual expense -
(U/S-19(30))

Statutory deduction amount 216,000

Less: Related Actual expenses:
Repair & Maintenance 150,000
Salary of Caretaker (Tk. 10,000*12) 120,000
As statutory deduction is lower than actual (54,000)
expense there is no income generated U/S-
19(30)
(III) Income from Residential Building at Narsingdi 600,000
(Tk. 50,000*12 months)
Less: Fully exempted (as per 6th Sch.; Part-A; Para-38) 6 600,000
-

Page 4 of 8
(C) INCOME FROM HOUSE PROPERTY (I + II + III) 465,000

Þ Income from Agriculture:

Selling of Crop (under borga system) 100,000
Less: allowable deduction (no allowable deduction) 7 -
100,000
Profit on sale of harvesting composite machine 8 100,000
(D) INCOME FROM AGRICULTURE 200,000

Þ Income from Capital Gain:

Gain on sale of harvesting composite machine 8 30,000
(E) INCOME FROM CAPITAL GAIN 30,000

Þ Income from Other Sources:

(i) Cash Dividend (Grossed up) 66,667
Less: Exempted (6th Sch.; Part-A; Para-11A) 50,000
16,667
(ii) Allowance from BFFWT 180,000
Less: Fully Exempted (6th Sch.; Part-A; Para-56) 180,000
-
(iii) Honorarium from talk show at private TV Channel 5,000

(iv) Credit purchase of building construction materials not 300,000

paid back within 2 years [U/S-19(29)]
(v) Income U/S- 82(C)
Income from consultancy service (Grossed up) 55,556
Compensation against acquisition of property (Final 300,000
discharge)

(F) INCOME FROM OTHER SOURCES 677,222

TOTAL TAXABLE INCOME FROM ALL HEADS 2,348,012

Total taxable income except income U/S-82 (C)(D) i.e. final discharge 2,048,012

Total taxable income except income U/S-82(C) 1,992,456

Computation of Actual Investment

Amount
Particulars
(Tk.)
(i) Employees contribution of GPF 70,000
(ii) Investment in Govt. Treasury Bond 500,000
(iii) Donation to Janata Bank Fund to celebrate 100th birthday of -
Father of the Nation (as paid in cash)

Page 5 of 8
 (iv) Investment in mutual fund 50,000
(v) Investment in DPS (maximum limit Tk. 60,000) 60,000
Total Actual Investment 680,000

Computation of Investment Allowance

(i) 25% of total income excluding income U/S-82© 498,114

(ii) Actual Investment Amount 680,000

(iii) Grand Amount 15,000,000

Eligible Amount (lower of above three) 498,114

Investment Allowance (15% of Eligible Amount) 74,717

Computation of Average Tax Rate considering income from capital gain & income U/S-82(C)(2)

Total taxable income including Capital Gain & Income U/S-82(C)(2) 2,048,012

Income Slab Income Balance Rate Tax Amount

On 1st 475,000 1,573,012 0% -
On Next 100,000 1,473,012 5% 5,000
On Next 300,000 1,173,012 10% 30,000
On Next 400,000 773,012 15% 60,000
On Next 500,000 273,012 20% 100,000
On Rest 273,012 - 25% 68,253
263,253

Average income tax rate 12.85%

As average tax rate is lower than 15% for capital gain tax no need to calculate tax amount further.

Notes:
(1) As Mr. Ziamis a war wounded gazatted freedom fighter his initial tax exemption limit is Tk.475,000
(2) As he retired from his service end of April, 2020 so 10 month's salary is only considerable here.
(3) Though car facility is an ownership transferrable arrangement but as it is still in the name of company so
normal perquisite is considered here.
(4) Employee's contribution to GPF is an income as it is not included in basic salary calculation.
(5) Bank charge is only applicable for less tax Govt. securities and not allowable for Treasury Bond.
Commission charge is not an allowable deduction as per sec-23
(6) Income from house property at Norsingdi meets the condition specify in 6th Schedule; Part-A; Para-38 so it
is non-assessable income
(7) U/S-27 of ITO 1984 no deduction is allowable in case of agricultural income derived from borga system.
(8) Gain & Profit on sale of Harvesting machine:
Cost of machine 200,000
Less: subsidy from BADC 50,000
Page 6 of 8
 Actual cost of machine 150,000
Less: Accumulated Depreciation as Per ITO 100,000
WDV of machine 50,000

Sales Price 180,000

Less: original cost 150,000
Capital Gain 30,000

Sales Price 180,000

Less: WDV 50,000
Total Profit 130,000
Less: Capital Gain 30,000
Agriculture Income 100,000

Solution of the Q. No. 4

(a)
(i) Determination of Arm's length Price:
Here the arm's length price is USD 4,000 considering comparable uncontrolled price (CUP) method.
Determination of Income based on Arm's length Price
Particulars USD BDT
Sale of export (USD 4000 * 15 units) 60,000 5,280,000
Less: Cost of Sales (USD 2000 *15 units) 30,000 2,640,000
Income from international transaction 30,000 2,640,000

(ii) Comparable Uncontrolled Price (CUP) method has been followed in computing arm's length price.
CUP method is appropriate when all the comparable information is available both for controlled &
uncontrolled entity.

(iii) Determination of Additional Income:

Particulars USD BDT
Arm's Length Price 60,000 5,280,000
Less: Actual sales price (FOB) 45,000 3,960,000
Difference of Income 15,000 1,320,000
Additional Income earn by Govt. 4,875 429,000

(b)
ABC Inc.
Status: Resident Company
Income Year: 2019-20; Assessment Year: 2020-21

Taka Taka
Income from Business or Profession:
Net Profit as per Profit and Loss Account 400,000
Add: Inadmissible Expenses
Salary expense 200,000
Head office expense 10,000
Incentive bonus 20,000
Oversees travelling expense 3,750
Page 7 of 8
 Office rent 44,000
Advertisements (5/6 th) 100,000
Donation 80,000
Bad Debt 35,000
Trade Mark 25,000
Legal Expenses 10,000
Loss on Embezzlement 30,000
Income Tax 25,000
Share Discount 70,000
Dividend Equalization Fund 40,000
Depreciation 70,000 762,750
1162,750
Less: Expenses Admissible but not Shown: Depreciation 60,000
1102,750
Less: Income received from Non-Business Heads
Dividend 60,000
Gain on sale of Asset 25,000 85,000
1017,750
Add: Revenue gain on sale of asset 5,000
Taxable income from Business 1022,750
Non-Business Income: Dividend 60,000
Capital Gain on sale of Asset 20,000 80,000
Total Income 1102,750

Computation of Tax Liability:

SL Particulars Gross Income Tax Rate Amount of Tax
Total income except dividend and
1 capital gain 1022,750 25% 255,688
2 Dividend Income 60,000 20% 12,000
3 Capital Gain 20,000 15% 3,000
4 Stock Dividend 150,000 10% 15,000
Gross Tax Liability 285,688
Less: Tax rebate of CSR Activities 50,000 10% 5,000
Net Tax Liability 280,688

* End of Question Paper *

Page 8 of 8